Endowment Plans Vs. Term Insurance Plans
Table of Contents
It is always advised that you purchase an insurance plan as early in life, as possible. They help you judiciously save up for a financially secure and stable future. There are many types of insurance plans that are available. Each of them has its own benefits, pros and cons and caters to individual requirements and situations. This is why it is important to know the differences between the various types of plans.
Endowment plans and term insurance plans are both hugely popular choices in terms of the insurance. Read on to find the difference between these two types of insurance plans.
What is an Endowment Plan?
Endowment plans pay out benefits in lump sums in case of the death of the policyholder or in case of maturity. Usually, the maturity terms for endowment plans are ten, fifteen and even twenty years. Endowment plans invest your money into market-linked funds like equity and debt funds. There is no choice of funds available and the returns depend on the contemporary market trends.
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What are Term Insurance Plans?
Term insurance plans are traditional live covers providing insurance plans that provide cover and benefits for a specific period or “term”. There is a death benefit that is provided if the policyholder dies within the term. This type of insurance plan does not provide any death benefit. However, you can add riders to the basic term insurance plan, to enhance its cover.
Endowment Plans vs. Term Insurance Plans: Differences
Endowment plans and term insurance plans differ from each other on a few points. Take a look at them below.
|
Parameters |
Endowment Plans |
Term Insurance Plans |
|
Facilities Provided |
Provides insurance protection as well as investment opportunities |
Pure insurance plan with protective benefits such as life cover and riders |
|
Benefits Available |
Maturity as well as death benefits available |
No maturity benefits available but death and rider benefits are paid out |
|
Cost |
Relatively more expensive |
Less expensive as there is no guaranteed return component |
|
Payout Methods |
Lump-sum payouts for maturity as well as death benefits |
Benefits can be paid out in lump sum, regular instalments or even a combination of both |
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All You Need To Know About An Endowment Policy
Conclusion
Term insurance plans and endowment plans, although both insurance plans have distinct differences among them. The choice of an insurance plan is yours and depends on your financial goals. Nevertheless, they both provide different kinds of security.
